SUPPLY CHAIN MANAGEMENT

LESSON 5: DISTRIBUTION

NETWORK DESIGN

By

Fazeeda Mohamad

Faculty of Industrial Management

fazeedamohamad@ump.edu.my

Chapter Description

• Aims– Enable students to understand the role of distribution and the

network design in supply chain.

• Expected Outcomes– Students should be able to

• Determine the role of distribution in supply chain

• Discuss factors related to distribution network design

• Elaborate network design

• References• Chopra, Sunil, and Peter Meindl. (2016) Supply Chain Management: Strategy,

Planning, & Operation. 6th. Ed. Upper Saddle River, NJ: Prentice Hall.

Chapter Outline

5.1 Role of Distribution

5.2 Factors Related to Designing Distribution

5.3 Network Design

Objectives

To determine the role of distribution in the Supply Chain

To discuss the factors influencing distribution network design

To elaborate the

network design in SC

2

3

1

LEARNING OUTCOMES

Distribution: Roles

in a SC

Definition of distribution

How does distribution effects the SC process

What is the best choice of distribution network in

achieving SC objectives?

Example of companies with efficient and effective

distribution network.

Steps taken to move or store products from suppliers to end

users.

Achieve variety SC objective: cost and customer value

Depending on the firm’s operational process whereby inappropriate

network may give negative effect towards firm’s profitability

Zara, P&G, 7 eleven??

Distribution Network Design:

Factors involved

Two main dimension need to be focused:

• Value delivered towards customer needs

• Cost involved in meeting customer needs

Distribution Network Design:

Factors involved

Facilities & Costs, Inventories Cost,

Response Time & Transportation Cost

Lower total transportation

costs

Shorter response time

for the customers

Higher inventory

costs,

Higher facilities costs

Higher number of

facilities

Source : Pixabay

Network Design

• Where should the customer pick up their goods?

• at the designated location or

• directly to the customer's location

• Should the products go through

• the middleman or

• intermediate location

In designing a distribution network, an organization

needs to emphasize on

TWO (2) important decisions

Network Design Option

Manufacturer Storage +

Direct Shipping + In transit Merge

(MSDSIM)

Manufacturer Storage + Direct

Shipping (MSDS)

Distributor Storage + last mile delivery

(DSLSD)

Distributor Storage Carrier Delivery (DSCD)

Retail Storage + Customer

Pickup (RSCP)

Manufacturer/Distributor Storage + customer

Pickup (MDSCP)

Performance for all networksdesign are characterized by costand service factor

Source : Maxpixel, Wikipedia, Pixabay

MSDS

Manufacturer

Retailer

Customers

Product Flow

Information Flow

MSDSIM

Manufacturer

Product Flow

Information Flow

In-Transit Merge by Carrier

Customers

DSCD

Manufacturer

Customers

Product Flow

Warehouse Storage by

Distributor/Retailer

Information Flow

DSLMD

Customers

Product Flow

Information Flow

Distributor/Retailer

Warehouse

Manufacturer

MSCP

Retailer

Pickup Sites

Product Flow

Cross-Dock DC

Customer Flow

Customers

Information Flow

Manufacturer

RSCP

Distributor Warehouse

Customers

Product Flow

Information Flow

Manufacturer

Retailers

Conclusion of The Chapter

• Conclusion #1

– Generally, distribution is the movement of products from the supplier to the end user. • Elaborate network design

• Conclusion #2

- Decision related to distribution network design will effect the

customer value as well as the SC cost.

• Conclusion #3

- Distribution network design enable a firm to operate effectively and efficiently through the identification of nature of the business and how responsive they are to their customers.